What Are The Consequences Of Filing For Bankruptcy?
Contrary to what most people say, bankruptcy is not necessarily bad. The U.S. and the rest of the world recently faced a massive financial blow due to the pandemic. In the future, economies will continue to be volatile, leading to inflation, and rising debt.
That said, bankruptcy is a choice for many who want to free themselves from their mounting financial debt. But is it necessarily wrong to file for bankruptcy, even when it is the only option?
The Need For Bankruptcy
There are situations where bankruptcy becomes an option. These can be sudden economic downturns or personal circumstances that individuals may suffer from. More often than not, these are beyond their control and only put additional strain on their finances.
Examples include someone whose credit card has been maxed out due to unforeseen circumstances or an individual who can no longer take on other loans. There are plenty of unexpected events that could lead others deeper into debt and financially constrained.
Personal tragedy, a downturn in business, and layoffs, among others, can lead to bankruptcy. It does not necessarily connote financial irresponsibility.
If you have large debts that you cannot repay, are in danger of foreclosure, or are constantly fighting off mobs of creditors, declaring bankruptcy is one of your options. While there are consequences in doing so, it can save your home, free you from your debts, and keep your creditors away.
Bankruptcy Is A Constitutional Right
The Constitution of the United States provides the right for its citizens to file bankruptcy as a way to begin anew under Article 1, Section 8. Congress enacted the bankruptcy code to cover all bankruptcy cases. Its amendment in 2005 further required individuals to provide tax returns and proof of income, credit counseling, and others.
In other words, constitutionally, every individual has the right to file bankruptcy to protect their finances and to start anew in their economic lives.
Is Bankruptcy Necessarily Bad?
Bankruptcy does severely affect your credit score and your ability to take out loans. However, it is possible to recover from bankruptcy over time. With a good number of your debts discharged, you can meet your financial obligations and rebuild your credit score.
Note that your bankruptcy will show on your credit report for ten years if filing for Chapter 7 and seven years if filing for Chapter 13, two of the most common forms of bankruptcy that individuals file.
Over time, however, bankruptcy will have less of an impact on your credit score. You can always rebuild your credit by making on-time payments, keeping some of your credit available, and catching up on overdue bills, among others.
The Stigma Against Going Bankrupt
Bankruptcy proceedings are a matter of public record. Your bankruptcy petition would technically be accessible to people.
While your petition is available through the federal court system, it is unlikely that your next-door neighbor or co-worker will come across your bankruptcy case. They would also need to spend time getting access, which is more trouble than it is worth.
To the average person, your bankruptcy rarely matters. Sometimes, it is better to return to square one and file for bankruptcy. It is not necessarily a bad thing.
In Need Of Bankruptcy Assistance?
Bankruptcy proceedings can be a daunting experience. Be sure to seek counsel before deciding to file for bankruptcy. For more advice on bankruptcy, contact Lincoln-Goldfinch Law and let an experienced bankruptcy attorney assist you.
Summary
Bankruptcy can simply mean that you are in need of a clean slate to start over financially. It can affect your credit score but there’s a chance to get that credit back and have the bankruptcy erased in several years’ time. For those who are suffering financially and have been fighting off debt, filing for bankruptcy can be a good thing.
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